Financial institutions could hold the key to widespread mobile wallet adoption
It’s no secret that anticipation for rapid and widespread mobile wallet adoption has significantly deflated since the launch of Apple Pay in late 2014. While 56 percent of North Americans report being “extremely aware” of mobile payments, only 18 percent use them on a regular basis, according to Accenture. But a lack of instant mass adoption does not mean that the mobile payments industry hasn’t experienced growth and innovation. It has. With other big names entering the mobile payments space, such as Samsung and Google, and retailers like CVS and Kohl’s, the race to win the mobile adoption challenge is still very much on.
So, what’s holding consumers and merchants back from diving into mobile payments? Vantiv and iModerate teamed up to find out by surveying 800 consumers about their attitude toward mobile payments. What we learned is echoed by many similar studies by other companies—one of the most common barriers to adoption is the fear about the security of mobile payments.
Adopting mobile wallets hinges on trust
In addition to the practical concern about having payment information loaded in a device that could be physically lost or stolen, many respondents expressed uncertainty about the security of the technology itself. Will sensitive payment information be transmitted securely? Can it be intercepted by thieves? Will thieves be able to retrieve the payment data by hacking the retailer? There are a lot of questions around security that play a part in consumers’ reluctance to get on board with mobile payments.
If security concerns are a major barrier to mobile adoption, it stands to reason that trust is a key component to overcoming that barrier. How do players in the mobile space build trust with consumers?
As any marketer will tell you, building brand awareness and trust takes time. It doesn’t happen overnight, which puts tech start-ups at a significant disadvantage. Accenture divides consumers’ perception of trust into four dimensions: security, privacy and data control, accountability, and the benefit/value that consumers perceive the brand to have. Their findings with regard to trust and mobile payments reveal that consumers trust well-established companies at a much higher rate. In fact, 50 percent of respondents were more likely to trust traditional card providers, large retail banks, and large technology companies like PayPal and Apple. In contrast, only 24 percent of respondents trust new entrants to the mobile payments industry.
This is encouraging for financial institutions (FIs) looking to deepen relationships with their cardholders. FIs have a distinct advantage when it comes to trust, in that cardholders already trust them with their finances and their personal data—something not many other players can claim.
Entering the mobile payment space
How can FIs put this trust into play with regard to mobile payments? It depends on the goals of the institution. To start, they can act as trusted advisors for all things payments—including mobile wallets. Institutions looking for even bigger impact could do a lot more.
Visa and MasterCard both announced their decision to allow banks and credit unions to add in-store payments functionality to their mobile banking app last year. Several large institutions have launched NFC-based payments for Android apps with the hope of encouraging consumers to use mobile payments. Wells Fargo tested the waters with remote deposit capture, and after seeing a good measure of success, expanded to a mobile wallet, the Wells Wallet.
Card brand and card issuer wallets are not enabled on iPhones, since Apple has restricted third-party access to its mobile payment platform. Whether that will become a hindrance to Apple or to FIs remains to be seen as the great wallet race plays out.
Whether your FI is moving toward enabling mobile payments on a mobile banking app or prefers to stay out of the wallet business, making an effort to capitalize on the trust cardholders have in their FI makes good sense. Use that trust as a spring board to deepen relationships with your cardbase. Taking an advisory role with cardholders is a great way to stay relevant in today’s disruptive market. Ensure that they are aware of all the tools and services available to them and that they feel confident in your FI’s security services. Doing so will help secure your FI’s place as a trusted partner.